Frank Lorenzo
From Wikipedia, the free encyclopedia
Francisco A. Lorenzo (b. May 19, 1940 ) is an investment manager, entrepreneur, philanthropist, and a former airline CEO in the United States.
Since 1990, Frank Lorenzo has been president of Savoy Capital, Inc. and professionally devoted to asset management, private investments, and venture capital.
Lorenzo was born to Spanish immigrants in Queens, New York. He graduated from Columbia University in 1961, working his way through College, selling neckties, waiting tables, and driving Coca-Cola trucks. He was admitted to Harvard Business School straight from college, graduated with an MBA in 1963, and went to work in the finance divisions of Trans World Airlines and Eastern Air Lines.
In 1989 Lorenzo received the John Jay award for Distinguished Professional Achievement from Columbia University
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[edit] Continental Airlines
[edit] Pre-deregulation and Texas Air
In 1966 Lorenzo and Harvard classmate Robert J. Carney established an advisory business which provided novel airline management recommendations. In 1969 Lorenzo co-founded an aircraft leasing company called Jet Capital Corporation. In 1972 Jet Capital acquired Texas International Airlines (TI), a struggling regional carrier, based at William P. Hobby Airport in Houston, Texas previously known as Trans-Texas Airways.
Lorenzo pushed new marketing approaches on the U.S. airline industry, including the first regulator approved low fares (first known as "Peanuts Fares" because some were so startlingly low) and other consumer benefits, like being the first carrier to forbid pipe and cigar smoking on airplanes in 1976 and one of the first U.S. airlines to offer fully computerized airport check-in in 1978.
Lorenzo was active in recruiting a talented and energetic work team. In fact, during the late 1970s, TI was an incubator for much of the talent that would subsequently form the core of other U.S. airlines. Former Lorenzo managers were at some point CEOs, founders, or top executives of existing or new airlines, which included: JetBlue, People Express, TWA, New York Air, Midway Airlines, Chicago Air, Presidential, and others.
The combination of cost rationalization with marketing, pricing, and service innovations returned TI to profitability and in 1977, Lorenzo was awarded the Aviation Week and Space Technology Laureates Award during an event held at the Smithsonian Institution's National Air and Space Museum.
[edit] New York Air
In 1980 Lorenzo created a holding company for TI called Texas Air Corporation. Shortly after forming Texas Air, Lorenzo started a new airline called New York Air (NYA), the first post-deregulation airline. New York Air was based at New York's LaGuardia Airport, very near the Queens neighborhood where Lorenzo grew up. New York Air would become Lorenzo's challenge to the expensive Eastern Airlines Shuttle, and provided cheaper and more frequent (hourly) flights between New York, Boston and Washington-National. The ALPA pilots' union fought it vigorously.
New York Air grew rapidly, adding scheduled services from LaGuardia to Cleveland, Buffalo, Detroit, Louisville, and other cities, before eventually being folded into today's Continental Airlines.
[edit] Continental Airlines
In 1981 Texas Air initiated the takeover of Continental Airlines. Texas International was merged into Continental Airlines in June 1982. TI ceased to exist and the "new Continental" relocated its headquarters to Houston. Lorenzo was determined to build Continental into a low-cost full-frills airline, focusing on profitable routes, in order to reach sustainability in the new free-for-all deregulated marketplace.
Lorenzo took Continental into Chapter 11 bankruptcy in September 1983 after extensive negotiations with labor unions proved unsuccessful. Bankruptcy, up to 1984, allowed immediate cessation of union contracts and imposition of new labor conditions, subject to later Court approval and revision. A more streamlined Continental emerged out of bankruptcy shortly after the original filing and the Bankruptcy Court approved management’s measures.
In 1985, Texas Air attempted a takeover of Trans World Airlines. Although TWA's management favored Lorenzo over Carl Icahn, TWA's unions feared Lorenzo and negotiated special concessions with Icahn. TWA's Board eventually accepted Icahn's offer.
[edit] Frontier and People Express
In 1985, Lorenzo's Texas Air Corp. made an offer for a Denver-based regional carrier, Frontier Airlines, opening a bidding war with People Express, which was headed by Lorenzo's former TI associate Don Burr.
PeopleExpress placed the highest bid and paid a substantial premium for Frontier's high-cost operation. On August 24, 1986 Frontier filed for bankruptcy and ceased operations. Texas Air acquired PeopleExpress on September 15, 1986, at the same time gaining Frontier, which reinforced Continental's already formidable Denver hub.
On February 1, 1987, People Express, New York Air, and several commuter carriers were merged into Continental Airlines to create the sixth largest airline in the world.
[edit] Eastern Air Lines
Lorenzo pursued negotiations with another troubled carrier that suffered the deregulation marketplace, Eastern Air Lines. Texas Air acquired Eastern on February 24, 1986 and started working on its turnaround and possible integration with Continental.
Some of Eastern's assets were used to create a world-wide reservation system, System One, and Continental's hub at Newark Airport. Lorenzo divested non strategic assets such as the Eastern Shuttle, which was sold to Donald Trump, and the South American route system, sold to American Airlines.
The machinist, fight attendants, and pilot unions struck in 1989. A labor agreement needed to be reached under the new Bankruptcy Law.
President George H. W. Bush did not act on a National Mediation Board recommendation to appoint a presidential emergency board to attempt to reach a labor agreement. The Bankruptcy Court named a trustee to run Eastern in 1990. Eastern Airlines ceased operations and was liquidated in 1991.
[edit] Divestiture from Continental
In 1990, after having been CEO of Continental and Texas International for 18 years, Mr. Lorenzo sold his controlling interest in Continental Airlines to Scandinavian Airlines System, and stepped down from his CEO role to pursue other entrepreneurial and investment ventures. During his eighteen year tenure, the airline grew from 15 jet aircraft and revenues of $225 million, to 350 jet aircraft and revenues of over $5 billion.
[edit] Investment Manager
After the sale of his interest in Continental, Lorenzo founded Savoy Capital, Inc. in 1990 in Houston, TX. Savoy is a professional asset management organization which invests on behalf of accredited outside investors.
[edit] Philanthropy
Lorenzo is a trustee of The Hispanic Society of America, an institution with a free-entrance museum of Art. The museum is located in NY, and houses the largest collection of Spanish art outside Spain, with major paintings by Velázquez, Goya, Zurbaran, El Greco, and Sorolla.
Lorenzo has been a donor and contributor to other arts and charitable organizations.
[edit] References
- Roy Rowan From Mao to Now, a reporter’s fifty-year pursuit of Powerful People (ISBN 0-7867-0312-1), Carroll & Graf Publishers, Inc.
- Buckley, William F. Jr., [1] Frank Lorenzo & the free market in National Review, September 17, 1990
- The Handbook of Texas [2] Texas Air
[edit] External links
- Hispanic Society to move to downtown Manhattan [3] [de:Frank Lorenzo]]
